With the Lashkar-e-Taeba (LeT), believed to be behind the 2008 Mumbai terror attacks, remaining Pakistan's most problematic militant group, the US fears an Islamabad-linked terrorist attack against India could undo efforts to improve ties between them.

"Both India and Pakistan
have made calculated decisions to improve ties, despite deep-rooted mistrust," US director of National Intelligence James Clapper said in his annual report to the US Congress on Tuesday on the threats facing the United States.

"They held a series of meetings in the past year and will probably continue to achieve incremental progress on economic relations, such as trade, while deferring serious discussion on the more contentious issues of territorial disputes and terrorism," he noted.

"Even modest progress, however, could easily be undone by a terrorist attack against India linked to Pakistan, which could trigger a new crisis and prompt New Delhi to freeze bilateral dialogue," Clapper warned in the report giving the assessment 16 US intelligence agencies.

LeT "will continue to be the most multifaceted and problematic of the Pakistani militant groups," the report said suggesting "the group has the long-term potential to evolve into a permanent and even Hamas/ Hizballah-like presence in Pakistan."

Hamas (Islamic Resistance Movement) is the Palestinian Sunni Islamic organization that has governed the Gaza Strip since June 2007, while Hizballah (the Party of God) is a Lebanon-based Shia terrorist group formed in 1982 in response to the Israeli invasion of Lebanon.

In US intelligence assessment the Taliban-led insurgency has diminished in some areas of Afghanistan but remains resilient and capable of challenging US and international goals.

Taliban senior leaders also continue to be based in Pakistan, which allows them to provide strategic guidance to the insurgency without fear for their safety, the report said.

Al-Qaeda's influence on the insurgency is limited, although its propaganda gains from participating in insurgent attacks far outweigh its actual battlefield impact, it said.

"India will continue to support the current Afghan Government to ensure a stable and friendly Afghanistan," the report said, as "India sees its goals in Afghanistan as consistent with US objectives, and favours sustained ISAF (The International Security Assistance Force) and US presence in the country."

"India will almost certainly cooperate with the United States and Afghanistan in bilateral and multilateral frameworks to identify assistance activities that will help bolster civil society, develop capacity, and strengthen political structures in Afghanistan," it said, "Moreover, India consistently ranks in the top three nations that Afghans see as helping their country rebuild. As of April 2012, India ranked as Afghanistan's fifth largest bilateral donor," the report noted.

Turning to Sino-Indian relations, the report said neither India nor China currently seeks to overturn the strategic balance on the border or commit provocations that would destabilise the relationship.

"However, India and China are each increasing their military abilities to respond to a border crisis," it said noting, "Both consider these moves to be defensive, but they are probably fuelling mutual suspicion and raising the stakes in a potential crisis."

Cyberattacks pose more of a threat to the United States than a land-based attack by a terrorist group, while North Korea's development of a nuclear weapons programme poses a "serious threat," Clapper said.

However, there is only a "remote chance" of a major cyberattack on the United States that would cause widespread disruptions, such as regional power outages, the report said noting most countries or groups don't have the capacity to pull it off.